Investment firm TransCentury says it will reach a settlement with the Sh8 billion bondholders before the March 25 maturity date.
The Nairobi Securities Exchange (NSE)-listed firm in a statement Monday ruled out chances that it will default on the huge debt, but fell short of revealing details of how it will settle the convertible bond it took in June 2011.
“In particular, the board is confident that an agreement to settle the bond will be secured in the very near future and, in any event, before maturity,” said the statement.
Repaying the debt is likely to involve taking new loans or renegotiating for a restructuring or roll-over with the bondholders since the company does not have the cash in hand to settle the debt.
Converting the loan into equity will lead to a major dilution of current shareholders’ stake, while taking a new loan will increase the company’s debt burden.
The Sh8 billion owed, which includes interest accrued on the original Sh6 billion principal, is more than four times TransCentury’s current market capitalisation of Sh1.6 billion.
Latest available disclosures show that TransCentury ended 2014 at a negative cash position of Sh454.7 million, necessitating the fundraising options the company has been exploring in recent months.
The bond, listed on the Mauritius Stock Exchange, is accruing an annual interest of six per cent while a further six per cent premium is to be paid on the units held to maturity.
This means that the typical bondholder will get a minimum payout representing 133.8 per cent of original investment.